The Cotton situation

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The Cotton situation
United States -- Dept. of Agriculture. -- Economic Research Service
United States -- Agricultural Marketing Service
United States -- Bureau of Agricultural Economics
Economic Research Service, U. S. Dept. of Agriculture. ( Washington, D.C. )
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Bureau of Agricultural Econonics
Was hi nrf ton

CS-23 September 29, 1938.
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Suu*r.x .. ." 'Tz:RY

Cotton prices have fluctu.te'l considerably during the past few weeks

with a tendency to decline, Major influence, reports the Bureau of Agri-

cultural Economics, -inslule the pclitic::l crisis in Europe, cenc.ral1 reduction

in mrill activity in the principal foreign r.Lanufictuiring countries and smaller

sales than production of cotton textileo by i.i.nufacturors in this country.

Salss of cotton textilos by do.sctic :.ianufacturers in the first 6

w-eeks of the current cotton-narkcti,-- season apparently have been. below

production despite iicrcas.:d sal.2 ii. the soc-r.ul an'l third weeks of September,

Mill activity and cotton ci..nsiuption, however, when adjustrcd for seasonal

variation, have incruasod since early July and have averaged Li, her th-i for

nearly a year. While this i.iprov.eo.t 4.s at least Ipartly duo to heavy sales

in June, it is expected that sales duringg; the months i;:-r..ediat,-ly ahead will

be sufficient to maintain cotton r-ill c:nsuL.ption cnnsidcrably above the aver-

ago for the past 12 months.

The general cotton textile s.tu-tioLo.n in foreign countries has become

nmoro unsatisfactory durinC the paAt r..rnh, In a nu4ibcr of iiportrnt cotton

manufacturing countries m.nills ccntinuci to seloil a smaller volume of cotton

cloth and yarn than was rrodCLuced, do-,pito further curt ailuc.nt in activity.

The statistical position cf the .cotton t.xtile industry in most countries and

prospects fcr a continued lower level of central business iornitions nmakoe the

outlook with respect to cotton consunptlon in foreign countries less favorable

than that for the United Statos.



The situation with respect to supplies of raw cotton appears to have

changed very little during the past month. While the September estimate of

the United States crop was 163,000 bhales (of 4.78 pounds not) less than that

of August, this is equal to only a fraction of 1 percent of the approximately

25-million-bale world supply of American cotton or of the probable world

supply of all cotton of more than 50 million bales.

Information as to the probable size of the total 1938-39 foreign crop

is still limited but the indications are that it will bo somewhat smaller

than the record production of last season. In view of the substantial increase

in carry-over of foreign cotton on August 1, however, the world supply of

this cotton nay again roach a now high and exceed the supply of American cotton.


.- Since-the beginning of the current season domestic cotton prices have
shown a not decline of approximately one-half cent per pound. During the
first few days of August, Middling 7/8 inch cotton in the 10 designated markets
averaged 8.57 cents per pound but by September 24 averaged approximately
8 cents per pound compared with 9 cents in early July. At the time of the
announcement of the 1938 Cotton Loan Programn, on August 27, Middling 7/8 inch
cotton in the ten markets averaged slightly higher than the loan value of 8.3
cents which was established for this particular quality. Since that time,
the European political crisis appears to have accounted for a considerable
portion of the variations in cotton prices and perhaps at least a part of the
net decline. Even without this development, however, sales of cotton textiles
and cotton ruill activity in many foreign countries probably would have con-
tinued unfavorable.

The decline of approximately 1 cent per pound in the United States
price of American cotton since the early part of July has boon accompanied by
a soiowhat similar decline in Liverpool. The price of American cotton in the
latter -iarkot has boon considerably vweoaker than the price of Egyptian Uppers
so that American cotton is somewhat more favorably priced from the standpoint
of encouraging increased consumption of American than in June or July. Current
prices of American cotton in Liverpool, however, arc slightly higher in rela-
tion to prices of Indian, Egyptian, and Brazilian than on the average in the
1937-38 season.

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cs-23 3-


The 201,000 running bales of American cotton exported' in August represented
a 9 percent decline in comparison with exports during August 1937, according to
data released by the Bureau of the Census. Tra!e reports indicate that during
the first half of September exports made a less favorable showing in comparison
with a year earlier than in August, with the result that for the first month and
a half of the season total exports were approximately -one-fifth less thin in the
corresponding period last season.

In view of the unfavorable outlook with respect to cotton consumption
in Europe and the Orient 'during the months immediately ahead, it seems quite
likely that exports may continue well below those of a year earlier for at least
a substantial part of the current season. This seems particularly likely in view
of the fact that in general, cotton consumption and mill activity in foreign
countries were at comparatively high levels during the early part of the 1931-39
season. Should cotton consumption in foreign countries improve during the first
half of 1939, the low level of consumption and exports during the corresponding
months of 1938 would make tho comparison more favorable for the latter part of
the present season. P


UNITED STATES: Consumption in 193-39 expected to show increase

Total domestic cotton consumption in 1937-38 amounted to 5,760,000
running bales. This was 28 percent less than consumption n *-th:n 'previous season
and 7 percent less than the average for the 10 years ended 1936-37. Although
consumer buying of Cotton textiles decreased considerably in the 1937-38 season,
th. decrease was not as great as the decline in manufacturers' sales. Consequently,
stocks of finished goods in channels of distribution declined materially and are
now well below a year ago.

Manufacturers' sales of cotton te-tiles dur-ing the first month and a
half of the current season have been below output even though there appears to
have been considerable improvement in sales during the 2 weeks end-d September 24.
However, with the comparatively low level of stocks in distributors' hands and
with further revival in industrial activity and payrolls eoxpcted, manufacturers'
sales of cotton textiles during 1938-39 seem likely to materially exceed those of
the previous season. This situation and the fact that mill activity so far this
season has averaged considerably higher than during the pr-:ceding season are ex-
pected to r--,sult in a considerably larger coaisumption during the current season
than in 1937-38.

During August the index of cotton consumption, adjusted for seasonal
variation, averaged 115 compared with an average of 94 for the 1937-38 season and
the low point of the past season of 77 reached in April. Trade reports indicate
that activity during the first 3 weeks of September avorae-d considerably below
the average for August but materially above early Tuly. During the first 2 months
of the past season, domestic cotton consumption was still at unusually high levels,


with the index of consumption for August and September 1937 averaging 129 and
121, respectively. Along with the marked recession in general business activity
during the matter part of 1937 and first p-rt of 1939, a sh-au-p decline occurred
in cotton consumption until April. During the current season the trend of
business activity is expected to be upi.ard.

EUROPE: V/ Cotton consumption in past season reduced, outlook unfavorable

The cotton y-ar, 1937-39, in the Europea-n industry was influenced chiefly
by the spreading economic recession in the world and the growing political unrest,
with their inevitable repercussions on world trade. In mnny of the countries
which derive a substantial part of their buying power from the exportation of
primary commodities, importers were under the stimulus of thn. rapid rise in the
prices cf their own commodities as well as of cotton goods and in early 1937 had
contracted for cotton goods in excess of current requirements. The subsequent
fall in prices of cotton goods found several of these countries overloaded with
high-priced stocks at the same time that price declines in their ovm commodities
began to curtail consumer purchasing The war in China with its serious
curtailment of consumption in the Far East added to these difficulties.

In addition, the statistical position for raw cotton by the end of 1937
had become sufficiently clear to indicate that an enormous carry-over would have
to be brought forward into the now season and that, with war in the Orient con-
tinuing and general economic prospects ly that time having become rather uncertain,
world consumption at least during the first half of the season could be of little
-vail to alleviate the pressure of the 1953-59 supplies. Hence, cautious buying
throughout -the *coftoni textile "field was fairly gencralithroughout the last half
of the 1937-53 season; and a tendency to -:crk off stocks of goods, which continued
to accumulate well into the spring of 19538, ":.'as later evident over most of Europe.

The unfavorable turn in the Euroeopn cotton te-til- industry, which
occurred in the latter part of the calendar year 1937 was largely a result of
extraneous developments which entailed a severe curtailment of cotton textile
exports. Domestic demand held up fairly well u-til later in the season. This
situation naturally affected first and foremost the countries heavily dependent
upon export outlets. Thus the 1937-53 decline in Eurorean mill consumption was
materially affected by the reduction in the United KingdoL.-m. It was, also adversely
affected by the decline in export orders which in the spring reversed the measur-
able recovery of mill activity in. Italy and brought a new crisis upon the cotton
textile industry of Czechoslovakia. A drop in versess and colonial export
business has been the decisive factor in the lull in B;lgium and the Netherlands,
and Germany other:uiso outstanding in the maintcn..ncr-e of high cotton mill
activity and, contrary to the general trend, consuming more cotton than in the
preceding: season has likewise experienced a substantial decline in cotton
textile exports.

lj Based largely on a report prepared in the Bureauts London, England, office
dated September 7.


While economic developments within the important cotton consumirg
countries of Europe are not very likely to maho for drastic further curtail-
ment in European cotton mill output in 1939-39, some further restriction inci-
dent to reduced home buying pmwer may occur. Since the falling-off of domestic
textile consumer demand in. Europe did not get under way until the latter part
of 1937 or early 193S, demand during the 1938-39 season should average con-
siderably below the preceding season if general economic conditions continue
at about present levels.

The tendencies that have been at work in reducing cotton textile exports
by European manufacturing centers in 1937-39 are not likely to be greatly im-
proved in 1938-39. It is possible that some improvement may occur during the
latter part of the season, provided thora 19 no general European war, but
world conditions are not likely to be conducive to much of an expansion in
international trade. Even if a genuine revival should get under way in the
United States which would support raw material prices and buying power in
certain cotton textile importing countries, it would not necessarily immediately
result in higher import buying by these countries. By maintaining their im-
ports during the past 12 months on relatively high levels despite a sharp
decline in their exports, these countries have been using up liquid balances
accumulated abroad in 1936 and the first half of 1937, and are, therefore,
not likely to respond immediately, through higher import buying, to any
possible upturn of their exports. The tendency rather is now to tighten up
on the expenditure of foreign exchange. On the other hand, it should be pointed
out that the export situation has beoon benefited by the partial clearing of
surplus stocks of hi&,-priced goods with which trade channels in the pVast year
have been clogged. And the -present level of cotton textile prices, taken by
itself, is favorable to consumption.

Groat Britain

The 1939-39 season in Great Britain has opened with prospects for
consumption rind imports of American. cotton less favorable than those of a year
ago. Barring' a definite reversal of current trends it is hardly to be hoped
that mill tkinus of Americn can cxcoed, if they can equal, the 1.2 million
bales of 1.937-3. Tho substantial backlogs of orders with which many mills
entered the last season, and which helped to sustain operations at satisfactory
levels through the first 6 months, have been. quite generally exhausted.
Meanwhile, demand has declined sev-erely. While some seasonal improvement is to
be expected in the autumn months, mills are with difficulty selling enough
yarn and goods currently to maintain operations in the industry as a whole at
more than about 50 to 60 percent of capacity.

Weakness in the t.'xtile de-n-nd situation first appeared in the export
markets. Current indications point to a decline of total exports from Great
Britain in the calendar year 193g, as with 1537, of about 27 percent
in the case of pi3ce goods and 25 percent in yarns, a total decline equivalent
to about 320 thousand bales of cotton. Although fairly general, the falling
off was especially marked on the continent of Europe and, with the exception
of Australia, in countries which derive a substantial part of their buying

CS-23 6 -

power from the export of primary-commodities. In many of these countries, under
stimulus of the raid. rise in the prices of their own products as well as of
cotton goods early in 1937, importers had contracted for cotton goods in excess
of current requirements and priced on the basis of cotton values at that time.
The subsequent fall in the prices of cotton goods, corresponding to the decline
in raw cotton, found several of these countries overloaded with high-priced
goods at the same time that price declines in their own commodities sharply
curtailed consumer purchasing power. Thus, for ex'-ple, in British West Africa,
which in 1937 ranked as Britain's second largest foreign customer, import
buying almost disapeared in 1935 with the sharp decline in cocoa prices.
Similar situations developed in Malaya and the Netherlands East Indies with the
alternate rise and fall of rubber prices in Arguntina, and in some of the
Dominions. In India, still the largest overseas market for British textiles,
increasing domestic production has operated to continue the long downtrend of
British exports to that country.

Retail trade in the home market has held up well in spite of a moderate
decline in employment and of a general slackening of business activity, as re-
flected in the decline in the Board of Trade index of industrial activity from
136.6 in the final quarter of 1937 to 122.1 in the April-June quarter of 1935.
Nevertheless, there seems to be some concern that if the present dovwntrend of
business continues, a growing awareness -f the recession in the popular mind
as well as a curtailment of incomes may be reflected later in a definite con-
traction of corns'ner buying. Movement of stock figures supports the impres-
sion that retailers are disposed for the present to let their inventories run

Mill takings of cotton of all kinds in 1937-3S fell off by about a half
million 500-pound bales from the 3.2 million equivalent bales in 1936-37, but
takings of American cotton of 1.2 million bales were as great as in 1936-37.
This relatively good consumption of American cotton can be explained partly by
more favorable prices and supplies of American relative to other growths, and
by the fact that in the first half of the season when normally American cotton
enjoys its greatest consumption, mill activity was well sustained and many
mills were v-illing to buy their requirements for some months forward.


The season 1937-39 for the German cotton textile industry was character-
ized by only slight expansion of operations, compared with 1936-37, despite
higher consumer deLand and considerably higher imports and domestic produc-
tion of cotton spinning materials (including substitutes). This situation, on
the one hand, gave rise to shortages of cotton textile goods in the consumer's
:ar'et over most of the season, somewhat intensified by higher exports of
fabrics; on the other hand, it resulted in an accumulation of raw material
reserves, following a season of considerable reduction in such stocks. Most of
the increase in stocks was directed to mills, while port stocks showed only a
moderate rise. The total increase in stocks of cotton spinning materials from
the ffrs.t of the 1937-3g season to the end may be estimated to have amounted to
something between 250,000 and 300,000 bales of 479 pounds net, raising stocks
from roughly 250,000 bales to from 500,000 to 550,000 bales.


German exports of cotton fabrics in 1937-38 were roughly 25 percent
above 1936-37 an increase which contributed somewhat to the tension in
domestic consumer supplies. Since April this year, exTorts of fabrics have
fallen below those a year ago, reflecting the beginnings of the earlier de-
cline in export business. Cotton yarn imports and exports in 1937-38 were
below those of the preceding season, whil.. i-iports of cotton fabrics were
about unchanged.

Admixture and utilization of cell-wool in cotton spinning mills con-
tinued high and rose to the highest level ever attained. About one-fourth
of the raw material consumed by German cotton spinning mills in 1937-38
consisted of cell-wool. The share of raw cotton in total German cotton
spinning mill consumption of raw materials for 1937-38 may be estimated at
about 45 percent, compared with about 80 percent in 1933-34. 2/ This is a
measure of the replacement of raw cotton by substitute materials that has
taken place during the past four seasons. An indication of the development
of total supplies of raw cotton and substitute materials not considering
movements of stocks is given in the following table:

Germany: Supplies of raw cotton and substitute materials !/

Item : 193-34 1934-35 1935-36 1936-37 1937-38
: : : : 2/
: Mil. lb. Mil. lb.
Raw cotton:
Net imports ............ 768.2 459.5 580.4 470.1 573.1

Cotton waste, linters, re-:
claimed cotton, etc.:
lTet imports ............: 99.9 198.1 165.4 203.0 238.1

Reclaimed cotton:
Domestic production 3/ 44.1 52.9 59.5 70.5 77.2

Domestic production 4/ : 8.8 17.6 44.1 141.1 235.9

Total of above ....... 921.0 728.1 849.4 884.7 1,124.3
17/ Revised figures.
2/ Preliminary.
3/ Estimates, based on "Warum Aussenhandel", by Dr. R. Eicke, 4th edition,
Berlin, 1938.
4/ Estimates, based on Statistische Uebersichten, Dresdnc:r Bank, Berlin.
Share used in cotton spinning mills only (80 percent of total production).

Of Germany's total imports of raw cotton in 1937-38, which were about
25 percent higher than in 1936-37, roughly 25 percent were American as compared
with about 23- percent in 1936-37, Thu share of Egyptian remained about the
same, at around 16 percent of the total. Indian fell from 13 to 8.4 percent,
and the share of Brazilian rose to the unprecedented high of almost 33 percent
of total imports, compared with 21.6 percent in 1936-37, roughly 18 percent

2/ In calculating these percentages, the movement of stocks in the two seasons
has been roughly estimated.

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in 1935-36 and about 20 pcrc :.nt in 1934-35. In absolute figures, cotton
imports from Brazil in 19b7-38 also reached a record high, by far exceeding
any previous season. As a matter of fcret, with an importation of about
400,000 bales of 478 pounds of Brazilian cotton, Germany took mor- than thc
annual quantity agrcd upon in the trndo agreements between thu two countries
which provide only for annual G.rmin taking of 236,000 bales. This nmay be
one of the reasons for the action taken by the Prazilian authorities in June
this year ruling that cotton exports to Grmainny, for the time being, may be
made only against payment in foreign exchange. So far this regulation has
not been withdrawn, even though for other products which had been affected
by a similar ruling, exportation to Germany within the custorrary ASKI paym.-nt
system is now again permitted.

Another development in the German import data is the continued decline
in cotton imports from Turkey which were 83,000 bales in 1934-35, 74,000 biles
in 1935-36, 42,000 bales in 1936-37, and only.about 14,000 bales in 1937-38.
This decline in thu face of considerably increased Turkish production, partly
reflects the growing domestic utilization of the cotton crop by th, expanding
Turkish textile industry. A relatively small quantity (10,000 bales) of
Russian cotton reappeared on the Girr.:an 7rmrk.t in 1937-38, following two
seasons of no imports. .. ... ......

Prospects for the Gcrman cotton industry' in 1938-29 are extremely
uncertain. Much will depend on the arbitrary decision of the authorities,
and the economic and political course which t,,v will take is uhkmown. There
is not much likelihood, however, that-German consumption capacity will increase
in the near future. It is probable that Gerri2n-y, having refilled depleted"
reserves in 1937-38, will take less cotton in 1938-39 than she took in 1937-38,
particularly since further substitution of cell-wool '.:ill probably occur.
Roughly 500,000 bale's of cell-wool (or 80 percent' b'f a tbtnl production of
620,000 bales) have been used in cotton spinning during 1937-38; and in the
coming season this figure, -ccording to present plans, may be raised to
700,000 bales. Considering all factors involvedd, it is not unlikely th t r.w
cotton imports in the new season may show a sub stantial decline.


From a consideration of trade reports, import d!ta and jort stocks,
it would appear that the Fr.nch industry in 1937-38 consumed somevhnt l.:-ss
cotton than in 1936-57. The figures on yarn production per spindle, however,
suggest a somewhat better situ-:tion. In any case, the season apparently
has been unsatisfactory. While the first half of 1937-58 i.s in most other
countries was still fairly favorable, the second half showed gradual
deterioration, with short-time and stoppage of equipment increaIsing. As to
the financial situation, the industry has comraplained about the continued
wvig increases. D'valuation in June and Scptc-mber 1937 ,omcwhit stimulated
exports of yarns and fabrics to the French pocsessions as wcll ;.s foreign
markets. The further devaluation in May 1938 probably also Lunported exports,
at least relatively.

Prospects for 1933-39 are rather uncertain. There h.s is yct been
no decided ch-ingr for the better in Fr-nce 's gz-i-rral economic outlook, and
as a result of the economic recession in other countries the outlook for

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exports is not encourag-ng. The restriction of cotton mill activity which
occurred in recent ricnth.s -s likely to extend into 1938-39. And, unless the
economic revival appears soon, further reduction is possible.


Following fairly favorable conditions in salts and activity into
October 1957, the situation in the Belgian cotton textile industry gradually
deteriorated. In April-June 1938, yarn production per spindle installed
was 21 pcrct~nt below the serre period last year. As a result, total mill
consumption of raw cotton in the season 1977-38 fell short of consumption
in 1976-37.

Prospects for 1929-59 are for continuance of less satisfactory con-
ditions. Since the Belgian cotton textile industry is exporting more than
50 perc::nt of its production, developments will be largely d tennined by
outside factors.


The Netherlands in 1937-38 s, of cotton as during 1936-37, which haC been a very favorable season. Toward
the latter part of the past season, hov-ver, the Dutch sinner and weaver
organization reported a lull in busine.-:s. In the spinning branch, nr-ins on
the whole were decreasing but activity has held up better than in many coun-
tries. In the weaving section, home and export d.!:'ir- for some time has
been much smaller than last year and the outlook is for a less satisfactory
season in 1939-59.


While activity in the Italian cotton textile mills was much above
a year .earlier until Fsbruary or March, there has been a rather marked decline
since then and in the early part of the cu-'re:.t season both spinning and
weaving activity was below the level of last year. A severe reduction in
export drme-Ld since the end of last year -is well as an unsatisfactory state
of domestic business accounted for the recessic:-. Nevertheless, as a result
of the much improved activity in the first half of the season, total raw
cotton consumption by Italian nills in 1937-38 wis above 1936-37. The great
expansion of Italian textile exports in 1977 was instrumental in raising mill
activity in thl-t year to rather high le-vels. The outlook for the new season
is not encouraging, though there are indications that manufacturers expect
some improvrnee:.t in the fall or early winter. 3/ An improvement in cotton
textile exports would dupend scmoj:hit on er. ,Jsion of demand from the 1T7ear
East and Arg,:nt ina, where Italy has become an important competitor of Great

Production of cut fiber in Italy during 1937-38 may be estimated at
around 400,000 bales, corpired with 280,C00 bales in 1956-57 and roughly
130,000 in 1955-36. Consumption by Italian cotton spinning mills of cotton
waste and substitute fibers (such as st .ple fiber, cottonized hemp, etc.)
in 1934 'uriointcd to -,bout 9 percent of their consumption of pure raw cotton,

_/ According to information recivsd from the American Consulate General at

CS-23 10 -

in 1935 it was about 16 percent, in 1936 it rose to 33 pr.rcnt and by 1957
reached 46 percent. In the first several months of 1938 (J.anuc.ry-May) this
i rcentage h:s declined slightly. to 4? percent.

Czc choslovakia

The Czechoslovaki-a cotton textile industry consumed considerably
less cotton in 1937-33 than in 1936-37. Mill activity since November has
been below levels of a yc-.r earlier. Unsatisfactory domestic as well as
export sales '-ccotunt for the reduction, though actual exports of yarns and
fabrics on old orders kept up fairly well.

The outlook for 1938-59 is not cncour'-ging. The political tension
in r-ntral Europe is not conducive to .ig'ir home consumption, and export
prosrccts are equally unccrtz-in. The loss in the Austrian market may partly
be offset by higher exports to the Danubipn countries which have harvested
man excellent griin crop this year. Since the restrictions in cotton mill
activity during 1937-38 were already severe, th-re should not be much further
curtailsent in 1933-39.

Pc 1 nd

In 1937-38 the Polish cotton ind-ust-ry -;-s in a position to expand
raill activity and raw cotton consrumtion greatly, .s -I result of better
hoe- and exr.ort d-.nnd. There have been d.clin:s since last spring, however,
-:.d .:ith economic and export -.rcospects sor.:'wit less s-tisfactory for 1958-39,
cotton consur-rtion in the new season is not expected to reach the favorable
level of 1i57-38. A satisfactory grcin 2rop outlook, -s compared with last
year's peer harvest, is a favorable factor in the situation. As a result of
nerarl strini-:cy in the bil'rne of p'-:.rts, wi-ith trade having shown a
large ir.ort deficit for some tir.-e past, the Governrnent recently restricted
import permits for several products including raw cotton.

0.?I-T: Cotton zonsurptior. lower in Japan but li-gh-.r in China

Total forwardiags of raw cotton to J:pL.nesc mills (which in recent
monthss have not b, en grr-atly different from nil- consumption) in August
:-mounLted to only 216,000 bales with 217,000 biles in July, 256,000
in L:-.y, anhd 331,CCC0 bales in August last vy-- ar. The sharp decline in Japanese
cotton consumption was the result of r-'.duced exports of cotton textiles from
Jaz_, sho ;.-;of fcr;ig cx.hange with which to import raw cotton and the
resulting Gcvcra.nt decrees requiring incre-- icd substitution of synthetic
fibers for raw cotton.

.E-crts indicate th-.t during July "-i.d early A':-ust a marked increase
ocuurr c in inquiries for cotton textiles from exmort marketss or from
exporters, but that er-xoort inquiries r,-ppcd off sharply during the latter
art of August and in early S..ptb~.Lbcr. It is also reported that there had
been a ttc-ndc.nry on the pirt of foreign to force cotton textile prices
to low levels as a result of the r( aliz'ztion tht under recent
Government regulations exports r-re ---nd.--tcry if Jpc:nose rills are to continue
to receive raw cotteron..


- 11 -

A rcor-.t report fro2i :-rclcltural Co. Izsic:?cr 0. L 3.'s-n at Shanghai
indicates th"t .-Ill cons.'.Ltion in C'-.?., i:cl..-iu.'i- in :u.'ist
probably amountcd to about 1-j5,003 tlcs. This represents a substantial in-
crease over the osti'Ltci cunsu:-;t'.on o a' -1t 120,30.A3 2"os in Juno a:.1 July
and is perhaps two or throe tines as great as the unusually, low onsum-ption
during the early part of last season, Because cf tht acti-ve Jezand and the
liUited output of yarn, prices of cotton yarn in Chi.-a.h-.vo, fcr soenotinme,
beer. especially high and do.pite a :oderato advance in cotton rices, s-incrs'
Largins are now at honozonly high leeols. ?ieco e0 s- production has
increased but not in relation to the ir.crcaze in sal s, consequently -rices
have acdvanced. materially. It i -uno:ally ,x;-octD that cotton ccn.-....3- Lt
W.ill contir.nue at levels substantially abovr the avorace for the 1937-33 SGas-cn
tut greatly '-clow the record levels of the -r-cci2i scascn,


ItX-ICA1: CCTTOc:I Supy incre-asos but is still below .cjr:

With the world carry-over of Aacricar. cotton. on :.:-ust 1, 1932, ab:-t
7.2 million bales lexj;cr than a yorx earlier, it -_:.o-rs froA the resentt
(Soptcuber) estimate of United States -zri-uction that the world supP.y Of
fArerican cotton for the current season "::il be a- little 1--r th-an that of
1937-389 The indicated .ly, now e-tt_-+cd at 2-.1 ilion r"ira '4-1n2c2,
is 2 percent larger than in 1937-33, th-. tLri lar--st in i-st.:ry, and. 16 ::cr-
cent larger than the 10-year (1927-36) avLryr.;e but it is -.cut 1 million bales
smaller than the 7oeck sup-ly of 1932-33. Whilo the Sept.:.' -.r estinate Df the
doncstic crop was 163,000 bales (of 478 _-oun's not, -and a sm.-..lcr er cf
rifuinicg 'balas) less than that of Au--uzt, this is -.'uivalent to cnly a fraction
cf 1 percent of the indicated supply of Anerican ccttnn,

Factor of consi.ic.rablo ir- ortance in ccnr.cction ;.ith the present
season's supply of ^eric-n cotton is the quantit- cf cotton z-.-cn which tzc
Governr- cnt has advancoi loans, the maturity .- for vhich is July 1_, 3-1.,
At the berirninC of the current season, stocks *:f such cotton ountod to
a.prroximtoly 7 million balos0 Furthermoroe, it is quite .ossiblc that, u.,cr
he 1i936 loan pror. n, stocks zf such ccttcn ray increase still further.
Even with no further increase, however, the rlc.!lcticn cf those stocks frc=.
the present ostiLate of su:pl' for the season lives an indicate su:-;ly cf
so-called free cotton of 15.1 million bales ->hich is a little 1arer th a_:n
the suop!y cf such cotton during, the "'ecl;..c season but =ich smaller than
in the early 1930's,

FOREI-I! COTTCN: Carry-eve__r E but reduction ex: o-tee to 'o doI

With the -world carry-over of foreign cotton on .u-ust 1, 1933t, vhich is
ostirvtod at 9.8 million bales, approximately 2.7 million bales larcrcr than
a year Carlicr, a substantial reduction in the 1l36-39 forei-n crop is neces-
sary if the supply of this cotton is not to sel-.'.- an increase over the reccrt
supply of 1937-38, Reports thus far received with res-ect to the 1533-39
foreign crop indicate a probable reduction in the current scasc:ns iarkcti-ro,
but sufficient infor-:ation is not now available to detcr::ino the extent Cf
the reduction. It seens quite likely, ho-.:cver, that at least a .ar-o part cf
the increase in the curry-cver of this cotton. at the bciinnini of the season
will be offset by a snallcr crop than in 1937-38.

11II I IIIUBIBIII B I II BBlliilii III 121 08900I 17 11
3 1262 08900 4179

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